Interview with Airbus CEO Fabrice Brégier: Airbus and innovation

Leeham: We would like to discuss one of your pet subjects, innovation and more specifically innovation at Airbus. After leading your competitor over decades in this area you have slipped behind in the last 10 years. Could you comment on that?

Brégier: I would agree that when you believe that you are the number one, if you don’t keep the spirit of a number two, you will lose your number one position. I think Airbus focused a lot of efforts on the development/industrialization of the A380 and perhaps during this period we did not have enough resources to look ahead on innovation.

But I would actually not agree that we are behind on innovation. We have just launched the A350 which gives us the leadership in this segment.

Leeham: But the A350 does not return the innovative advantage to you.

Brégier: If you look at the cockpit functionalities of A350, any pilot will tell you that it is better and smarter than the 787…

Leeham: As former pilot, I would say they are different in their philosophy but roughly equal in the innovations they bring….

Brégier: You saying roughly; I take that as we are ahead (smiles)… OK, let’s look at the aircraft instead. We avoided mistakes like more electric aircraft, a very costly solution which does not bring value to the airlines. We are focusing on cost effectiveness for the airlines. Look at our A320neo.We launched it and Boeing was nowhere….

Leeham: I can’t agree. They were working on something even more innovative, the NSA [New Small Airplane], but you cornered them…

Brégier: Oh, no, we did not corner them. Our solution was just smarter…. What I want to communicate is that innovation is just not technology innovation. We define innovation as bringing the appropriate answer to a problem at the appropriate time to the market and my job is to convince my engineers, with the help of people like John Leahy, Kiran Rao and others, to listen to the market.

As an example of our innovation work, we have studied fuel cells for 10 years and we are way ahead of the competition. I just learned that Toyota has decided to produce the first car with fuel cells; one day there will be an aircraft application for it and we will be way ahead of anybody else.

I have a lot of respect for the competition. They are innovative in many areas but I believe we at Airbus also have many strong points. The change now is that we are being more proactive and trying to listen to the customer more carefully. One example is that…honestly, 18 months ago, actually a bit less than that, more like a bit more than a year ago, nobody in Airbus was seriously considering the A330neo.

Leeham: We did the numbers and urged Airbus to do it two years ago….

Brégier: Absolutely, and we had strong customers like Tony Fernandes of AirAsia, Steven Hazy and other major leasing companies telling us you are crazy; this is a fantastic aircraft, why don’t you re-engine it. It did not work with a pure re-engine. We had to increase the span of the wing and bring additional improvements on the aircraft level, and we could do that because at the same time we had launched the A330 at 242t and with that we could carry larger, heavier and more efficient engines.

And for me to develop this aircraft in three and a half years is, for me, sheer innovation, perhaps not so fancy like new technology, which in the end is very costly, but this is innovation for us.

Now, re: new technology, one day there will be a successor for the A320 and here we and Boeing agree that it will happen around 2030, perhaps a bit earlier, perhaps a bit later. But there the big question becomes: will it be a full composite aircraft with a composite fuselage? On paper it is very elegant but to produce, say, 80 of these fuselages per month; we don’t know how to do that. We need big breakthroughs, and then if we knew how to do it, it would be very costly. So it is a mix of capacity, performance but also cost. The price of a product is also very important.

Future competition

Competition from up and coming nations like Russian, China etc. was then touched upon. The question was, Where will these be in 10 years?

Brégier: In 10 years, Airbus and Boeing will still be ahead because it takes a long time to develop and produce an aircraft; a safe and reliable aircraft, and then to develop a credible international footprint to sell and support the aircraft. But there will be more competition.

It is not so easy however to come into this market. As an example, the A320 and 737 customers have mostly stayed loyal during the transition to A320neo and 737 MAX. There are exceptions, with some shifting to A320neo because it has many advantages, but also some changed from A320 to 737 MAX. But for the vast majority, they stayed loyal because they have the same pilot rating, same maintenance concepts, etc.

So this inertia, when we have over 6,000 aircraft in the field and over 5,000 in the backlog, it makes life more difficult for our competitors if they don’t come up with a game changer. But what is a game changer? It has to gain value in so many areas, it can have advantages in price or operating cost, but the reliability of your product and size of your footprint for support and upgrades also has a lot of value for the customers. So it is not so easy.

But the answer for Airbus is clear, more innovation. It can take the form of continuous improvement of the present product families or, if the market, technologies and your capabilities are mature enough to do it; a game changing product.

Conclusion

Brégier as a CEO is very approachable, yet sharp and with a smile at hand. He recognizes that they had to buckle down to get the A380 out the door and that they were pushed into making the A350 in full composites a bit earlier than ideally wanted. With the latter he has shown that Airbus has come a long way since the days of the loosely coordinated group of national industries.

Brégier knows it is time for Airbus to regain the innovation advantage and he has a more innovative Airbus high on the agenda.